- Term sheets:
- Describe the nature of the investment.
- Outline the price of a share and whether investors are paying up front or in tranches.
- Are not legally binding, and are conditional on entry into formal legal subscription or shareholder agreements.
- Should clarify what terms are binding and what terms are not.
- It's helpful to define shareholder terms to avoid issues further down the line.
- Some other items an investor will want to include are:
- Key performance milestones (they may also choose to make tranche payments against meeting these).
- Founder commitments, for example, staying in the role for a minimum period.
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